New Economics Papers
on Collective Decision-Making
Issue of 2009‒03‒07
eight papers chosen by

  1. Imperfect Information, Democracy, and Populism By Binswanger, J.; Prüfer, J.
  2. Coordination, focal points and voting in strategic situations: a natural experiment By Ganna Pogrebna; Pavlo Blavatskyy
  3. Federalism and Public Choice By Hills, Roderick
  4. Partisan Control, Media Bias, and Viewer Responses: Evidence from Berlusconi's Italy By Ruben Durante; Brian Knight
  5. Supply Equals Success? The Sweden Democrats’ Breakthrough in the 2006 Local Elections By Erlingsson, Gissur; Loxbo, Karl; Öhrvall, Richard
  6. Ordering infinite utility streams comes at the cost of a non-Ramsey set By Luc LAUWERS
  7. Acyclic social welfare By Lahiri, Somdeb
  8. Groupthink: Collective Delusions in Organizations and Markets By Roland Bénabou

  1. By: Binswanger, J.; Prüfer, J. (Tilburg University, Center for Economic Research)
    Abstract: The modern world is complex and difficult to understand for voters, who may hold beliefs that are at variance with reality. Politicians face incentives to pander to voters' beliefs to get reelected. We analyze the welfare effects of this pandering and show that it entails both costs and benefits. Moreover, we explore optimal constitutional design in the presence of imperfect information about how the world works. We compare indirect democracy to direct democracy and to delegation of policy making to independent agents. We find that indirect democracy is often welfare maximizing.
    Keywords: Imperfect information;beliefs;democracy;populism;accountabil- ity;experts.
    JEL: D72 D78 D83
    Date: 2009
  2. By: Ganna Pogrebna; Pavlo Blavatskyy
    Abstract: This paper studies coordination in a multi-stage elimination tournament with large monetary incentives and a diversified subject pool drawn from the adult British population. In the tournament, members of an ad hoc team earn money by answering general knowledge questions and then eliminate one contestant by plurality voting without prior communication. We find that in the early rounds of the tournament, contestants use a focal principle and coordinate on one of the multiple Nash equilibria in pure strategies by eliminating the weakest member of the team. However, in the later rounds, contestants switch to playing a mixed strategy Nash equilibrium.
    Keywords: Coordination, focal point, voting in strategic situations
    JEL: C72 C93 D72
    Date: 2009–02
  3. By: Hills, Roderick
    Abstract: This paper is a draft chapter for an edited collection on Law and Public Choice being published by Edward Elgar and edited by Dan Farber and Anne Joseph O’Connell. The chapter provides an overview of public choice literature regarding three aspects of federalism - exit-based normative justifications for federal regimes, voice-based normative justifications for federal regimes, and positive theories for how federal regimes are sustained through the political process. In general, I suggest that the most promising trend in public choice theory is the effort of economists, political scientists, and lawyers to tackle the thorny question of “voice” in federal regimes - that is, how subnational politics differs in federal regimes from the politics of unitary states. Moreover, the case for federalism based on exit critically depends on the argument for federalism based on improvement of ”voice.” Otherwise, migration from one city or state to another to escape predatory regimes would simply be pointless movement out of a ”Leviathan” frying pan into a ”Leviathan” fire. Public choice theorists seem to have an inveterate suspicion of claims that subnational government facilitates political participation, perhaps because the entire tradition of public choice is based on the theoretical impossibility that collective action can accurately represent individuals’ preferences and values. Yet nothing in the conventional account of how decentralization improves political ”voice” is inconsistent with the abstract principles of public choice theory.
    Keywords: Public Choice; federalism; political process; predatory regimes; Leviathan; collective action;
    JEL: H77 H7 A12 A10
    Date: 2009
  4. By: Ruben Durante; Brian Knight
    Abstract: This paper examines the impact of partisan control of the media on news content and viewership by consumers with differing ideologies. We use data from Italy, where the main private television network is owned by Silvio Berlusconi, the leader of the center-right coalition, and the public television corporation is largely controlled by the ruling coalition. Our first finding is that when, following the 2001 national elections, the control of the government switched from the center-left to the center-right, news content on public television shifted to the right. Second, we find evidence that viewers responded to these changes by modifying their choice of news programs. Right-leaning viewers increased their propensity to watch public channels which, even after the change, remained to the left of private channels. Furthermore, some left-wing viewers reacted by switching from the main public channel to another public channel that was controlled by the left during both periods. In line with these shifts in viewership, we also find evidence of an increase in trust in public television among right-wing viewers and a corresponding decrease among left-wing ones. Finally, we show that this behavioral response, which tended to shift ideological exposure to the left, significantly, though only partially, offset the movement of public news content to the right.
    JEL: D7 H0
    Date: 2009–03
  5. By: Erlingsson, Gissur (School of Social Sciences, Växjö University, Sweden); Loxbo, Karl (School of Social Sciences, Växjö University, Sweden); Öhrvall, Richard (Statistics Sweden, Stockholm, Sweden)
    Abstract: The Swedish party system has been one of the world’s most stable, and anti-immigrant parties have been largely absent from the centre-stage of Swedish politics. It is thus peculiar that an anti-immigrant party, the Sweden Democrats (SD), made a dramatic breakthrough in the 2006 local elections, gaining representation in 144 out of 290 municipalities. The purpose of this article is to explain why the SD gained representation in almost half of the Swedish municipalities. Results indicate support for a supply-oriented argument: whether the SD ran with a formal ballot or not has a substantial and statistically significant effect on their probability of receiving representation even when a series of variables, suggested by previous research, is controlled for. The result has important ramifications, since it implies that no obvious socioeconomic factors, e.g. local ‘fertile grounds’, brought SDs success about. Rather, what decided its fate was whether or not the party had an organizational presence and actual candidates running for seats.
    Keywords: Anti-immigrant parties; elections; Sweden
    JEL: D72 L26
    Date: 2009–03–04
  6. By: Luc LAUWERS
    Abstract: The existence of a Paretian and finitely anonymous ordering in the set of infinite utility streams implies the existence of a non-Ramsey set (a nonconstructive object whose existence requires the axiom of choice). Therefore, each Paretian and finitely anonymous quasi-ordering either is incomplete or does not have an explicit description. Hence, the possibility results of Svensson (1980) and of Bossert, Sprumont, and Suzumura (2006) do require the axiom of choice.
    Keywords: Intergenerational justice; Pareto; Multi-period social choice; Axiom of choice; Constructivism.
    JEL: D60 D70 D90
    Date: 2009–02
  7. By: Lahiri, Somdeb
    Abstract: In this paper we show that if the Pareto relation is acyclic then the set of all Pareto optimal social states coincides with chosen social states of acyclic Paretian social welfare relations. Subsequently we show that given an acyclic Paretian social welfare relations the set of all social states chosen by it coincides with the set of all states chosen by strict Paretian extensions whose strict extension is the given social welfare relation.
    Keywords: acyclic; Paretian; social welfare
    JEL: D71 D60
    Date: 2009–02–22
  8. By: Roland Bénabou
    Abstract: I develop a model of (individually rational) collective reality denial in groups, organizations and markets. Whether participants' tendencies toward wishful thinking reinforce or dampen each other is shown to hinge on a simple and novel mechanism. When an agent can expect to benefit from other's delusions, this makes him more of a realist; when he is more likely to suffer losses from them this pushes him toward denial, which becomes contagious. This general "Mutually Assured Delusion" principle can give rise to multiple social cognitions of reality, irrespective of any strategic payoff interactions or private signals. It also implies that in hierachical organizations realism or denial will trickle down, causing subordinates to take their mindsets and beliefs from the leaders. Contagious "exuberance" can also seize asset markets, leading to evidence-resistant investment frenzies and subsequent deep crashes. In addition to collective illusions of control, the model accounts for the mirror case of fatalism and collective resignation. The welfare analysis differentiates valuable group morale from harmful groupthink and identifies a fundamental tension in organizations' attitudes toward free speech and dissent.
    JEL: D23 D53 D83 D84 E32 Z1
    Date: 2009–03

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